Bondholders oppose Trump casino plan

August 12, 2009 10:05:50 AM PDT

By WAYNE PARRY

ATLANTIC CITY, N.J. - August 12, 2009 --

On TV, this kind of thing gets you fired. Bondholders who stand to lose their $1.25 billion investment are standing up to Donald Trump, asking a bankruptcy court judge to block the planned sale of three Atlantic City casinos to the man who once controlled them.

The bondholders filed a motion Tuesday asking Judge Judith Wizmur to block the $100 million Trump deal, and instead accept their offer of $175 million, plus $75 million from the sale of Trump Marina Hotel Casino.

Though they bear his name, Donald Trump currently has no role in running the casinos or in the company that owns them, Trump Entertainment Resorts. He resigned as chairman of the board just before the company filed for bankruptcy in February.

Last week, the Trump Entertainment board voted to let Trump, his daughter Ivanka and Beal Bank buy the company in a deal that would wipe out other creditors.

In court documents, the bondholders refer to the proposed sale as "a brazen insider deal." They also want the judge to appoint a special examiner to look into the conduct of Trump Entertainment officials before and during the bankruptcy case. They allege the company had decided as far back as April to be bought by Trump and Beal Bank, a Dallas-based bank founded and run by Andy Beal, a close friend of Trump.

"The debtors' plan benefits two people - Andy Beal and Donald Trump - and ignores the legal rights of $1.25 billion of notes and all unsecured creditors by providing them with nothing," said Kristopher Hansen, an attorney for the bondholders.

Donald Trump said Wednesday he is optimistic his deal will prevail.

"The board members who approved that deal were appointed by the bondholders," Trump told The Associated Press. "The people who served as the bondholders' representatives are the ones who approved this deal because it was the better deal."

Trump Entertainment officials said they were studying the bondholders' motion and had no immediate comment.

The bondholders are offering $175 million for the three casinos - Trump Taj Mahal Casino Resort, Trump Plaza Hotel and Casino, and Trump Marina.

They also plan to complete the on-again, off-again sale of Trump Marina to Richard Fields - a former protege of Donald Trump - for $75 million.

Fields and his company, Coastal Marina LLC, initially offered $270 million in May 2008 and sued Trump Entertainment last month over the failed sale. Fields claimed the company allowed the property to fall into disrepair and diverted customers to other Trump casinos.

Under the Trump deal, Beal Bank would get co-ownership of the casino and would postpone the due date of its $486 million loan for eight years. Under the bondholders' deal, the bank would get $150 million plus unspecified interest payments at a rate to be set by the judge.

The bondholders' plan also would end litigation in Florida between Trump and Fields. The two had a falling out when Trump accused Fields of secretly cutting him out of a deal to develop a casino with the Seminole Indian tribe.